Posts Tagged ‘Finance Ministry’

After weeks of debates, on Monday the Knesset Finance Committee approved a bill to apply the Foreign Account Tax Compliance Act (FATCA), which the US has already signed with 113 countries. The 2010 federal law enforces the requirement for US citizens living abroad to file yearly reports on their non-US financial accounts to the Financial Crimes Enforcement Network (FINCEN). The law also requires all foreign financial institutions (FFIs) to search their records and to report the assets of US citizens living abroad to the US Department of the Treasury.

Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) was able, after lengthy negotiations with the Israeli Finance Ministry, to increase the protection of Israeli citizens whose information will be handed over to the US, and reduce in half (from about $27 thousand to about $13 thousand) the sanctions against financial institutions that fail to comply with new law for technical reasons. Gafni also managed to change the definition of charity organizations in the Haredi community (Gmachim), changing their definition from “financial institutions” to “organizations that benefit the public,” thus removing them from the FATCA zone.

The committee also succeeded in repelling the Israeli tax authority, which wanted initially to be able to use information gathered by Israeli banks for FATCA to their own local tax collection ends. As Gafni put it, “This is a bad law, and to come now and use it for other purposes that have nothing to do with its essence would be unthinkable.”

The issue of forcing foreign financial institutions and foreign governments to collect data on US citizens at their own expense and transmit it to the IRS has been attacked outside Israel as well. Former Canadian Finance Minister Jim Flaherty objected to the law’s “far-reaching and extraterritorial implications” which require Canadian banks to become extensions of the IRS and could jeopardize Canadians’ privacy rights.

There have also been reports of many foreign banks refusing to open accounts for Americans, making it harder for Americans to live and work abroad.

“Five years have passed, and prices have not gone down, and in certain cases they have gone up,” members of the Knesset Finance Committee told government representatives during Monday’s meeting marking five years since the summer of 2011 popular social protest in Israel.

The committee members slammed Finance Minister Moshe Kahlon for “being afraid to fight the monopolies,” but members of Kahlon’s Kulanu party said in response, “We are advancing many reforms, and we can already see the results on the ground.”

Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) said that “with all due respect to the Finance Ministry and talks of reform, in practice the prices have not gone down.”

MK Uri Maklev (United Torah Judaism) said, “Five years after the ‘cottage cheese’ protest, not only have the prices not gone down, in real terms they have increased, because the prices of commodities around the world have dropped 30-50%, and this is not being reflected in the Israeli market. Prices are 20% higher, on average, than in Europe. The prices of inputs have also decreased, as has the price of gas and energy, but this has not had any effect. What happened is that the monopolies and chain stores have gained huge profits at the consumers’ expense.”

MK Manuel Trajtenberg (Zionist Camp) explained that “the expense basket of a young family has three main components: housing, education and food. In housing the prices have only gone up; in education there has been some progress regarding ages 3-4, but not a week goes by that we are not asked to answer questions regarding family expenses related to education. An average family with three children spends some $1,300 a month on education, day care, afternoon child care, camps, and more. As far as food is concerned, some positive steps have been taken, but that nut has not been cracked and, ultimately, too much power has been left in the hands of a small number of companies.”

MK Yitzhak Vaknin (Shas) charged that the Trajtenberg Committee, which examined and proposed solutions to Israel’s socioeconomic problems, was established only to “ease tensions” and “take the wind out of the social protest’s sails.” In practice, he said, “nothing has been done.” Vaknin called to restore price controls, saying “in the absence of competition, this is the solution.”

MK Oren Hazan (Likud) said the problem is “greed.” The chain store owners and the major wholesalers “earn tens of millions on the public’s back,” he stated. “And meanwhile, here in the Knesset, people are strong at talking. The finance minister can make bold decisions and change the market without fearing his friends the tycoons. Here in this committee we have the power to advance a plan to dissolve the monopolies. We will enact a law to that effect.”

MK Roy Folkman of Kulanu said, “We have waged an all-out war on the monopolies. In Israel there is a very high concentration of market controls, and a finance minister who does not fear them has now arrived. We launched reforms in the importing of fresh meat and the prices have dropped. With fish as well, we created parallel importing. For years no one has dared to deal with the monopolies, which maintain a stronghold on Israeli politics, and we have started doing so. A change can already be seen in toiletries, food items, children’s toys and other items. The fight takes courage and ability. Increasing competition is the only way. Price control does not work; [corporations] would only raise the prices of other items. The business sector is more sophisticated than the regulator.”

MK Rachel Azaria, also from Kulanu, said “We are making great efforts, but every issue that reaches the Knesset gets stuck there. Every reform encounters objections, and it is nearly impossible to pass anything, including the fight against black market capital. I belong to the finance minister’s faction and it is my job to pass things, but nothing can be advanced; there are always dramas here; in some cases it’s the kibbutzim, in others kashrut – everybody has an interest. We have to be brave and deal with the basic problems: monopolies, quotas and interested bodies that prevent change. In the Arrangements Law we will introduce important reforms, and then we will see if all those who are yelling here will support them. We are the cause of the high prices. We have an opportunity to lower the cost of living, and I hope everyone here will support [the measures].”

Construction companies are no longer allowed to charge their customers fees for their own legal services, according to a key item in a new amendment to the Sales Law being promoted by the Ministry of Housing and Construction, Calcalist reported Thursday. Another significant change in the law would remove the requirement that contractors post a bank guarantee for the VAT portion of the cost of the apartment, and instead the state would set up a special fund to cover the buyers’ outlay. This would save contractors millions of dollars, releasing more than $1.5 billion in bank credit to the real estate market. The construction firm would still have to insure the rest of the buyer’s investment, in case said firm goes out of business.

The Housing Ministry, which began the move to amend the law nine months ago, is hoping the changes would pass by the end of the Knesset summer session in August. The move was spurred by the common understanding that the construction section of the current Sales Law is outdated, and has led real estate companies to develop their own ways of bypassing it, at the expense of their customers. The amendments were forged by an inter-office team that included Deputy Attorney General Erez Kamenetz, the Consumer Protection Authority, the Finance Ministry, and the Tax Authority.

“It is our responsibility to help the Israeli public get accessible housing, while legally protecting the buyers and maintaining fairness in all processes,” Minister of Housing Yoav Galant told Calcalist. One of the problems in the way housing business is done in Israel has to do with the buyer paying the contractor’s attorney for processing the new apartment at the Land Registry Office (the local word for the office is Tabu — no relation to taboos, the word is simply the Arabic mispronunciation of the Turkish word Tapu, or title-deed). A recent legislation limited the fees paid to said attorney to about $1,300, but even so, the clients may believe that by paying his fees the attorney is now working for them, which he certainly isn’t — he remains in the service of the contractor.

The Housing Ministry believes that registering the apartment and providing a legal deed is part of the overall product the contractor is expected to provide, and so they now want to go one step further and eliminate altogether the requirement for buyers to pay for this service.

There are other amendments which are not as crucial economically, but certainly add transparency to the process of buying an apartment in Israel. Companies would have to inform buyers of every change they intend to make in the original construction plan, for instance, if they want to add apartments. They also must inform buyers of changes in nearby lots, so that, if, for instance, their magical view of the Mediterranean would now be blocked by a 48-story tower, buyers would have the opportunity to get out of the deal and look elsewhere.

Contractors may no longer be permitted to sell apartments on land that is yet to be re-zoned for construction. If a plan for a new housing construction exists but the permit for building has yet to be issued, firms may sell units to buyers, but only with the proviso that the project is not yet legally authorized, providing the date for the expected authorization, and that buyers can get their money back in its entirety should the permit not be issued.

Also, any significant change in a purchased apartment’s layout, including in common areas such as storage spaces and lobbies, would be considered legally as failure to fulfill the contractor’s commitment and buyers may recoup their investment.

The heads of charity organizations in the ultra-Orthodox society, commonly known as Gemachim, received at least a temporary measure of relief from the Knesset Finance Committee, chaired by MK Moshe Gafni (UTJ), ahead of a new amendment of the Income Tax Act that takes effect in September and compels Israeli financial institutions to report through the local tax authorities on the Israeli financial affairs of US citizens. The amendment is the result of the Foreign Account Tax Compliance (FATCA) agreement between Israel and the US, which was a prerequisite for continued cooperation between Israeli and American financial institutions.

It’s not much, but MK Gafni demanded that the Finance Ministry and the Bank of Israel order the banks to give the Gemachim time until the end of June to resolve their status as public institutions, which he hopes would allow them to exclude themselves from the FATCA rules. Gafni envisions a tweaking of the amendment to exclude groups with deposits of less than $50 thousand, or holdings worth less than $50 million.

According to Chairman Gafni, the new regulations could bring the collapse of the Gemachim. “The Israeli government signed an agreement with the US government without considering the disastrous consequences for one of the most important enterprises of the Jewish people that has existed for millennia — the charity and mutual aid societies,” Gafni said, explaining that the Gemachim are “the only means at the disposal of a person under financial duress to receive an interest-free loan to get back on his feet.”

MK Israel Eichler (UTJ), Chairman of the Public Petitions, summoned Dr. Ilan Steiner, Director of the Bank of Israel Currency Department, to his committee hearing, to warn him against another aspect of the US attack on these charity institutions. According to Eichler, banks are being forced under pressure from foreign governments to close the accounts of Gemachim accounts, “in the name of ‘fighting terrorism’ and stopping money laundering, the IRS and the American government have become supervisors of all bank accounts around the world including in Israel. Everyone has to go through their inspection, so the Gemachim have received a letter that they will not be able to keep their bank accounts anymore.”

MK Eichler told Dr. Steiner: “I hope that the Bank of Israel find a way to abide by the agreements with the US while not mixing up the Gemachim with the war on terror. The banks must not become a burden and a restriction on associations and charity organizations who want to help people and do not engage in terrorism. There are limits to the madness of the banking system. We must not allow the charity organizations and Gemachim to be paralyzed by American pressures.”

The issues of compliance regarding money laundering and the war on terror stem from the side benefits of an IRS act that was intended to make sure US citizens who make money abroad share some of it with Uncle Sam. According to the IRS, FATCA targets tax non-compliance by US taxpayers with foreign accounts, focusing on individuals’ reporting about foreign financial accounts and offshore assets, as well as by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest.

Using the US’ enormous economic clout, FATCA bullies the world’s financial institutions into reporting on their American clients to Uncle Sam. Under FATCA, to avoid being withheld upon, foreign financial institutions must register with the IRS and agree to report to the IRS about their US accounts, including accounts of foreign entities with a substantial US ownership. Foreign institutions that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA.

Talk about working for the Yankee dollar.

According to The Marker, Gemachim stand to suffer three different ways from the new law: instead of permitting a Gemach to transfer money into their accounts, they could now be questioned regarding the source of the funds and whether or not tax was paid on them in the US; each deposit could be subject to harassment by the bank, in order to verify that it is not part of a money laundering scheme; and the Gemach could be saddled with a new definition as a financial institution, and as such would be compelled to report on its fund sources to the IRS or face criminal sanctions.

A deaf ear from the Finance Ministry will force the city of Jerusalem to send home thousands of workers across the capital, Mayor Nir Barkat warned on Thursday. Services in at least three key departments are also likely to be compromised.

The Jerusalem municipality has already notified 170 city cleaning workers of impending layoffs after a request for additional funding was denied by the Finance Ministry.

Some 2,000 more workers across the city are also to be laid off and the city’s cultural institutions, social services and education infrastructure will be affected as well.

“It’s an intolerable decision but unfortunately we have no choice,” Barkat said in a statement Thursday.

“The refusal of the Finance Ministry to transfer funds to Jerusalem does not allow the city to continue to provide these services. We are forced to take this most difficult step and lay off the workers we need.

“Making cutbacks on municipal requests affects social services, education and culture and it means the layoff of thousands of workers in the city,” Barkat warned.

“We were expected that in a period of terrorism there would be wider support, rather than be shown a cold shoulder,” he said.

“Without the transfer of government support to Jerusalem, there will be no escaping more painful cuts that will further compromise the standing of Israel’s capital city, and will hurt each and every resident.”

(JNi.media) Hundreds of municipal employees of the City of Jerusalem are planing to demonstrate on Monday morning in the Israeli Government Complex with 50 garbage trucks and dozens of municipal vehicles, following the announcement of budget cuts planned by Finance Minister Moshe Kahlon, Army radio reported. Treasury officials are unafraid, declaring, “We will continue to advance the city.”

The Jerusalem municipality appears committed to a fight to the bitter end against the Finance Minister. A letter sent to Kahlon by the capital’s administration warns that the cuts he proposes would result in hundreds of kindergartens losing their security personnel. The full list includes dramatic cuts in education, welfare and culture.

The Finance Ministry is outraged by this campaign of Jerusalem mayor Nir Barkat, and Treasury officials are expected to meet Monday morning with the Minister for Jerusalem Affairs Zeev Elkin to push back the attack on their decisions, even as the City’s protest continues downstairs.

Barkat posted on his Facebook page a call to “the Treasury and its leader” accusing them of forgetting Jerusalem, paraphrasing the Psalm verses (137:5-6), Barkat said Kahlon et al “forgot thee, O Jerusalem, forgot their right hand, and their tongue cleaves to the roof of their mouth, because they did not raise Jerusalem above their greatest joy.”

Where else but in Israel would a mayor and a minister conduct their open warfare using both garbage trucks and biblical verses?

“We have come today to protest the abandonment of Jerusalem,” Barkat proclaimed, “to sound the voice and the opposition of the people to the finance minister’s unprecedented refusal to transfer the funds necessary for the existence and strengthening of our capital city.”

Finance Ministry officials said in an angry response that “apparently Nir Barkat’s Jerusalem municipality suffers from serious managerial problems, otherwise there is no explanation to how they’ve wasted the $500,000 allocated to them in recent years. The Ministry of Finance will continue to develop and advance the city along with Jerusalem Affairs Minister Zeev Elkin.”

Deputy Mayor of Jerusalem Yael Antebi told Army Radio that “as member of Knesset, Kahlon promoted a law to increase the grants allocated to the capital. What happened [to his commitment] when it is now in his hands? Did it evaporate, like his promise to take care of the gas monopoly?”

Candidate Moshe Kahlon promised voters to resolve the disputes surrounding the best way to utilize the vast natural gas reserves off Israel’s shores—but after he was elected, Finance Minister Kahlon recused himself from dealing with the issue altogether, citing a personal relationship with the parties involved.